Alejandro Velasco

After the oil industry strike in 2002, 2003, Venezuela is under a liquidity crisis.

It doesn't have dollars coming in.

And so if you're a country that relies on this revenue that is traded internationally in the dollar, and that's what you use to then pay your state employees, services, et cetera, and the way that you do that is by converting dollars into your national currency,

And then there's also this fear of the economy tanking and people are just sending their dollars abroad because they feel like it's a safe currency.

What do you do?

You implement currency controls, right?

And so that's what Venezuela does beginning in 2003 to forestall this capital flight that is happening as a result of the oil industry strike, compounded by the lack of influx of resources that are coming in.

That is a perfectly both fine, legitimate, and in fact, necessary financial economic tool in a moment of crisis.

But when the crisis abates, they didn't remove the currency controls.

They kept them.

Now, why is that a problem?

Because what a currency control does is say,

You only have access to this amount of dollars, for instance, in a given calendar month or calendar year.

And at least when I was there at the time, it was $2,000 a year.

As an individual, you have access to this.

If you want more than that, you have to take out a special permission, right?

And if you want more than that, how are you going to get it?

The US has its currency, right?

So this is the entity, the national entity that controls all of the literal dollars and decides who gets access to those dollars.

It's such an abusable system.